Technology trade under uncertainty: sectoral heterogeneity across the US, China, and Europe

Abstract

This paper investigates whether uncertainty shocks weaken technology-trade performance across technology categories, through which channels they operate, and whether their effects differ across economies and time horizons. We develop a mechanism-based sectoral framework that links final goods, non-strategic components, and strategic components to distinct uncertainty-transmission channels. The panel VARX estimates are then interpreted against this framework to explain heterogeneous responses across technologies and economies. Focusing on the US, China, and European economies over 1998–2024, we estimate annual sector-specific panel VARX models for eight SITC Rev. 3 technology sectors, using two complementary trade outcomes: the export-to-import ratio (EI) and revealed comparative advantage (RCA). Operational uncertainty is proxied by Global Supply Chain Pressure Index, trade-policy uncertainty by Trade Policy Uncertainty, and geopolitical uncertainty by US-China Tensions Index. The results indicate strong own persistence and mean reversion in EI and RCA, with generally weak EI-RCA cross-transmission. Uncertainty effects are heterogeneous and mechanism-specific: operational shocks most consistently weaken trade performance in strategic component sectors, especially semiconductors, whereas trade-policy and geopolitical uncertainties primarily reallocate relative specialization rather than uniformly compress technology trade. Cross-economy patterns identify China as an exporter outlier and semiconductors as Europe’s key bottleneck, implying that resilience policies should be targeted by technology type and uncertainty dimension.